Dropping prices should have a cooldown timer

After my post discussing how vendor-client relationships are complete crap most of the time — which was really a thinly veiled excuse to post a funny vid — a friend of mine posted a response on my Facebook page:

While you’re right that you in essence ‘get what you pay for’ in this economic climate you’d be surprised how much lower vendors will go in order to keep a customer satisfied (which in turn could bring in more work…)
This is quite true, and I’m sure she wasn’t alone in her opinion, so here’s some additional insight. The problem isn’t the act of dropping prices, but the speed with which we as vendors come to that decision. Many vendors drop their prices at the first hint of customer disapproval. Clients know they can feign disappointment to try and get a better price (that’s what makes the video funny!), but if a vendor has a solid product at a reasonable price, they should ignore that impulse to cave to such requests. Consistently dropping prices unnecessarily has a lot of long-term penalties. The customer who gets a discount once will ask again, further decreasing the bottom line on that client work. Those bits of discount add up really fast, yet the companies I’ve worked with rarely stopped to calculate how much they are actually losing in discounts. Only when the customer was obviously taking the business to the cleaners did they give it a harder look. Plus there are more “fuzzy” net effects, like price perception. A product’s value is tied to the price that a customer actually pays, not what you “might have” charged them before you offered that on-the-spot discount. Decreasing the price decreases the value a customer places on the goods they receive. Luxury goods live and die by this rule. Why are Diesel jeans, Oakley sunglasses, and Coach purses considered premiums in their respective markets? An expert could talk about product quality, but the vast majority of people couldn’t identify these tangible advantages. The pricetag is the number one conveyor of luxury status. I’m not saying “never give discounts,” just that companies should be more selective in doling them out. Most of the time, clients already see the value of goods and services, and will pay for it, they simply want to squeeze as much value as they can out of it. Standing up to these scare tactics, as illustrated in the video, can save companies tons of trouble down the line.